The impact of defense procurement and research and development expenditures on manufacturing productivity growth

This dissertation considers the impact of federal research mid development (R&D) and procurement policies on the manufacturing industry Chapter I provides an introduction. Chapter 2 then reviews the history of federal industrial R&D and procurement and demonstrates that both were targeted to defense-related activities in manufacturing. Thus, federal industrial R&D policy can be best understood as a procurement-driven technology policy in which R&D activities were primarily funded because of their applicability to defense.; Chapter 3 reviews previous literature analyzing the economic effects of procurement-driven technological. change. This literature generally follows either the depletionary hypothesis, emphasizing the negative effects, or the spillover hypothesis, emphasizing the positive effects. While a review of empirical work demonstrates that most econometric studies support the depletionary hypothesis, I identify two potential flaws that may cause inaccuracies in these studies.; Chapter 4 addresses the first potential flaw by developing a disaggregated model which more accurately captures the targeting of federal industrial R&D and procurement to specific manufacturing sectors. Estimation of this model demonstrates that the government's procurement-led technology policies were an effective industrial policy favoring defense-dependent sectors.; Chapter 5 addresses the other potential flaw by developing a simultaneous equations model that measures the effect of R&D on output growth while also accounting for the relationship between federally and industrially-funded, R&D. However, while the model generates a positive estimated return to federally-funded R&D, other parameter estimates suggest that the flexible translog production function I employ and not the relationship between industrially and federally-funded R&D is responsible for this result. Given the highly aggregated daft employed, as well as residual econometric problems, I therefore conclude that further research of this issue is necessary.; As empirical work analyzing procurement-driven technological change necessarily ignores the unmeasureable welfare effects of public goods such as "National Defense", Chapter 6 then develops and a theoretical model that accounts for the social benefit of R&D in public good production, as well as the economic effects of knowledge slipcovers. Finally, Chapter 7 summarizes the dissertation's conclusions.